October 29, 2015 / 7:13 AM / 4 years ago

UPDATE 1-Lufthansa ups profit guidance after strong summer

* Now sees adj EBIT 1.7-1.95 bln eur for 2015

* Reduces fuel bill estimate to 5.7 bln eur

* CEO says cannot rely on tailwind from fuel

* Shares indicated 1.2 pct higher (Adds detail on outlook, fuel bill, rivals)

BERLIN, Oct 29 (Reuters) - German airline Lufthansa lifted its profit target for 2015 on Thursday, after a strong summer and cheaper fuel costs but warned more of price pressure ahead and said action needed to be taken on costs.

“We cannot expect to fly for too long with a tailwind of low oil prices,” CEO Carsten Spohr said, adding that cost savings of around 1 billion euros ($1.09 billion) had been identified for 2016 already.

Rival carrier Air France-KLM also reported better than expected results on Thursday, but it also spoke of the “overwhelming need” for cost cuts to keep pace with rivals.

The two legacy carriers are trying to bring costs down to compete with low-cost carriers on short-haul routes and more efficient Gulf airlines with newer fleets on long-haul routes.

Both Lufthansa and Air France have seen labour strikes as a result. While Air France has reigned in cost aims in the face of union pressure, Lufthansa’s Spohr has taken a tougher line, saying the group will only grow its main Lufthansa brand once it has achieved cost cuts.

Lufthansa reported better than expected third quarter adjusted earnings before interest and tax (EBIT) of 1.23 billion euros ($1.34 billion), against the average forecast for 1.08 billion in a Reuters poll.

It now expects an adjusted EBIT of between 1.75 billion and 1.95 billion euros for the year, compared with a previous forecast for over 1.5 billion.

Before Thursday’s statement, analysts were on average expecting Lufthansa to report full year profit of 1.7 billion euros, with estimates ranging from 1.5 billion to 1.9 billion euros.

Lufthansa also lowered its fuel bill estimate for 2015, predicting a total of 5.7 billion euros to be spent on fuel, against a previous forecast for 6 billion.

British Airways owner IAG, which has been improving profits faster than its legacy rivals thanks to earlier cost cuts, will report third quarter results on Friday.

$1 = 0.9151 euros Reporting by Victoria Bryan; Editing by Maria Sheahan

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